On to the referendum: Constitutional amendment for property tax caps

Today the Indiana Senate approved a resolution by a vote of 35-15 to place the already-enacted property tax caps into the state constitution. While one more vote in the General Assembly is needed to push this proposal on to the governor, the conventional wisdom at the statehouse is that this question will go to voters as a referendum this November.

What is most important now is that voters fully understand the proposal and the implications. There are a myriad of arguments for and against the caps themselves, and even more contention over placing the caps in the constitution.

A message from Senate Democrat Leader Vi Simpson on today’s vote

One of the prevailing concerns is that the long-term impact of the caps remains unknown. Let’s begin with a few questions we heard posed by lawmakers today…

How do we know that the 1-2-3% caps are the right levels?

If only 4% of the tax cap credits went to homeowners, is this the right answer?

How will imminent cuts in local services impact residents?

What is the impact on our farms and businesses which are now capped at higher levels than homesteads?

Will the property tax caps hurt the state’s economic development efforts?

Will the increases in the sales tax and local income taxes overcome the property tax savings realized for Hoosiers?

Background:

In 2008 lawmakers approved a comprehensive tax reform package to provide homeowners with property tax relief. The reform incorporated many changes, including caps on the amount of property taxes paid by property owners, the creation of a new supplemental standard deduction and the removal of certain budgets from property tax bills.

To cover the costs shifted from property taxes to the state budget, such as school tuition support, an increase in the state sales tax from 6 to 7% was implemented.

Additionally, local governments were given more options to raise needed revenue through local income taxes (often referred to as LOITs).